How do you maintain sustainable growth in an industry segment that is known for its cyclicality? This is the issue that’s keeping more than one executive in the heavy equipment, electrical, consumer durables, controls, power, building and/or components markets awake at night. Last week the Manufacturing Institute of Supply Management suggested a slowdown in the manufacturing sector citing weaker than expected numbers for the month of March.
As the globe gets smaller, I’ve started to see innovative companies using simulations to gauge and evaluate the impact of future events, in order to create the best business strategy for a particular situation. In fact, the waves of change will be more frequent and come with less warning. In order to achieve and sustain high performance, industrial products companies need a repeatable approach that aligns the organization and engineers growth.
Our industry research has shown that there is a clear difference between the companies that sustain consistent growth and those that appear to be trapped in a persistent cycle. So, as a manufacturer’s customer base changes, it needs to respond accordingly – requiring it to rethink its strategy and execution model for the next three to five years.
Four guideposts define the secret to high performance for industrial equipment organizations. In the most simplistic terms, these are:
- connecting the dots on macro and micro economic trends
- knowing your market and the ones “next door”
- understanding the customers’ value chain, and
- focusing on execution.
Let’s take a deeper look at economic trends. The root cause of most cyclicality in the industrial products segment is the macro & micro economic trends that preside over the global economy. Some of these include oil, green, metals, immerging economies, security, cost of money and housing, which are driving significant components of the global economy. These trends will impact the cost of goods sold, shifts in the competitive landscape, R&D/Capital investments, the creation of new markets and innovation.
Yet in a typical industrial products company, knowledge of macro economic trends resides with corporate finance or strategy, market intelligence lives in marketing, and knowledge of the customer value lies in sales and engineering. Any acquisition or new product launch must be evaluated by all the disciplines in a structured and consistent approach. The difference between leaders and laggards is this consistent ability to execute a repeatable growth agenda.
Given this environment, some will look at the glass and see it as half full, while others will see the opposite. The world is moving in new directions, and high performing manufacturers understand that their role is changing and evolving, and they are identifying ways to make the cycles work in their favor.